Sunday, February 14, 2010

LOAN SHARK IN CHIEF

How does the mob (as in mafia) get hold of business? Loans, that's how. That is not to say that banks are loan sharks, but I am saying that the game of finance today is being directed by the government....and that banks have been sucked into it because bankers have been controlled by government regulations that have caused the banks to lose solvency. If you want to see how the government creates a weak financial sector there are many examples from which to choose.

The United States was not created to be a bank. The United States government has no business whatsoever granting loans, i.e. student loans, mortgage loans, business loans, etc. Using our tax dollars to prop up certain universities, housing areas, or particular businesses is corrupt. First of all it is being done without the consent of the taxpayers. Secondly it skews the market and inhibits property ownership. Thirdly, it gives government control where there should be none. The entire premise of the government being used as a tool of finance is corrupt. It picks winners and losers depending on the administration in power at the moment. And when defaults on loans occurs, the government steps in and grabs ownership of what used to be privately owned property. This is to the advantage of the government bureaucrats and to the disadvantage of the economic well-being of the people, however it weakens both government and economic prosperity for the people in the process. Instead of "spreading the wealth around," it spreads risk and poverty around.

I say this applies to local governments as well. We have a perfect example here in our county. An entrepreneur comes up with a commercial enterprise, in our case; an Olympic Whitewater Center. The OWC is presented as an opportunity for Olympic atheletes to train and a recreational outlet for people who want to go rafting in a controlled environment. All well and good, but the entrepreneur can't get enough private financial backing to get the rafts in the water. In steps the local area governments to say they will use taxpayer money to back the construction and operation of this enterprise. The excuse is that the OWC will bring tourism and create a healthful recreation activity for all. (Nevermind that "all" do not have rafting on their list of preferred activities.) "All" will pay to get it up and running and the local governments will heavily back this for several years they say, until it becomes financially viable on its own. In the meantime, banks have also backed this operation to the tune of 12 million dollars. I am guessing that the banks were getting some preferential tax reductions in order to back this operation, but I have no evidence to prove that.

Time tells the story. After three or four years, the OWC has not turned a profit, is operating in the red and cannot pay back the loans. As usual with government bureaucrats running the show, everybody loses and nobody wins. The announcement has come recently that the banks are forgiving the 12 million in loans to the OWC. How interesting and convenient. What back door negotiation figured that one out? I honestly don't have all of the particulars in the financial maze set up for the OWC, but me thinks there are some rotten smelling fish in that White Water. The government is still on the hook. Or should I say the taxpayers are still on the hook, but now the taxpayers don't have to pay back the 12 million. Rejoice everyone. We only have to pay back the government backing, not the private bank backing? Hmmmmm....how does that work?

Well, I would think the banks have to make up that 12 million somewhere. Who can just swallow a 12 million dollar loss? Some things have to happen. The banks have to increase their fees and charge more to their customers to make up that kind of a loss. The banks have to get some tax exempt status to help them cover the loss, which in turn the taxpayers end up covering. The government, which takes over the remainder of the OWC costs, now has to charge the taxpayers more to cover the rest of the expenses of the OWC and to make up the difference for the tax exempt part the banks are getting. The local government, for all intents and purposes, either now owns or will end up owning the commercial enterprise that originally was supposed to be a private enterprise, unless they can find a sugar daddy private buyer to take on a failed enterprise.

Again, government is not supposed to be in the business of financing private enterprises. And when it does, it is usually for someone's pet project that isn't even close to necessary infrastructure like roads and bridges.

Moving on to the Loan Shark in Chief: On the Federal level we have seen this government loan situation turn into rotten fish on several stages. One of them is Fannie and Freddie and the Community Reinvestment Act which raped the public of billions in government backed loans that defaulted. The government ended up owning "toxic assets," i.e. lots of housing. And the banks ended up owning "toxic assets," i.e. lots of bad paper loans. Obama sees the banks are failing due to the government mandated CRA loans they made and subsequent derivatives they created to get themselves out from under the bad loans, so he puts the banks on the dole of the taxpayers. Now he is talking about loaning taxpayer money to private power companies to construct nuclear power plants. That way, the government will eventually own the energy from those plants and the taxpayers will pay twice; first for the energy and second for the loans from the government. Barack Obama loves government ownership of all things, so what does he do? He takes advantage of failing car industries and puts them on the dole of the taxpayers. He sees government usurpation in health care, energy, housing, education, all an opportunity to increase the power of the federal government. Who benefits from that? It certainly isn't the private enterprise sector. It isn't individual businesses, as they are paying through the nose to prop up the public sector. Like a parasite feeding off the host, Obama's policies will eventually kill the host, i.e. the private enterprise sector of the U.S. His loan operation is forcefully sucking the breath out of the country he needs for support.

I don't care if you call this socialism, communism, fascism or downright stupidity, all of it is unconstitutional. The United States government, nor the local governments were supposed to become banking institutions, operators of car companies and White Water Centers, or mortgage companies. It just isn't the function of government to do these things. And for those of you who think "a little European socialism" is such a great thing, you should take a good hard look at Europe right now and notice how bankrupt and desperate the EU is becoming. Greece, Italy, Portugal and Spain are all under water and failing due to socialist EU policies. We had a revolution in the 1700's to rid ourselves of financial tyranny by government and to separate ourselves from the oppressive policies of Europe. Why now would anyone think that following the irresponsible financial policies of European socialism would be a sane path to take? Watch out for those government loans and subsidies, folks. You may find yourself with a loan shark in chief at your door.

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